Evaluatingmethods to Encourageplug-In Electric Vehicle Adoption

EvaluatingMethods to EncouragePlug-in Electric Vehicle Adoption

A review of reports on PEV incentive effectiveness for California Utilities

Prepared by Plug In America for CalETC

October, 2016

Table of Contents

1.Executive Summary

2.Plug-in Electric Vehicle Background

2.1 Differences between PEV and ICE sales

2.2 PEV potential for electric utilities

2.3 PEV challenges for electric utilities

3.Methods to Encourage PEV Adoption

3.1 Programs that reduce adoption friction

3.1.1 Evidence of effectiveness

3.2 Incentives that reduce purchase cost

3.2.1 Evidence of effectiveness

3.3 Incentives that reduce operating costs

3.3.1 Evidence of effectiveness

3.4 Incentives that increase convenience

3.4.1 Evidence of effectiveness

3.5 Charging infrastructure

3.5.1 Evidence of effectiveness

4. Best Practice Recommendations

5. References

5.1 Work cited

5.2 For more information

5.3 Studies in progress

6.Appendix A - How Incentive Effectiveness is Determined

6.1 Types of studies

6.2 Simulations

6.3 Counting incentive takers

6.4 A-B tests

6.5 Pre survey

6.6 Post survey

6.7 Industry and analyst projections

7. About CalETC and Plug In America

1.Executive Summary

Plug-in electric vehicles (PEVs) offer enormous opportunities to electric utilities, along with a few potential challenges. This is in addition to the significantsocial benefits they offer to society at large and personal benefits they offer to owners. Sales are growing quickly, but due to a number of serious deficits in market support compared to gasoline vehicles, PEV market share is still below 1% in the US.

Planning for PEVs is a must for all utilities. Many have also determined that it would benefit them to encourage PEV adoption. To help utilities decide which methods of PEV encouragement are appropriate, this report reviews existing literature on the effectiveness of many different methods.Methods that seem effectiveand often suitable include:

Raising awareness by mention in newsletters, social media, bill inserts, etc.
Hosting events that offer test drives or rides in PEVs
Installing and operatingcharging stations; focused on apartments, workplaces, metro and corridor
Offering a financial incentive, like organizing a discounted group buy

More PEVs are coming; the only question is how fast they will arrive. Evenutilities that aren’t yet ready to encourage PEVs still need to monitor and plan for PEV growth. They can gain some control over PEV grid usage by offering PEV time-of-use (TOU)rates and load controlprograms that dynamically control PEV charging.

2.Plug-in Electric VehicleBackground

PEVs have several important social advantages over vehiclesthat obtain all of their energy from gasoline burned in an internal combustion engine (ICE). For example, PEVs are:

Better for the economy (Roland-Holst, 2012; Stroo, 2015) as electricity is far cheaper andlocal
Better for national securityas electricityis domestically produced, and from multiple sources
Better for air and water quality and CO2 emissionsgiven the CA generation mix (Nealer, 2015)

These benefits accrue to all citizens regardless of who buys the car, or what type of PEV they buy.The two main types are Battery-Electric Vehicles (BEVs) which are only propelled by grid electricity and Plug-in Hybrid Electric Vehicles (PHEVs) which drive first on electricity from the grid but have an ICE to take over for longer trips. They come in a variety of styles, sizes and prices; this variety is needed.

PEVs also offer several potential advantages to electric utilities, as well as a few possible challenges. Those will be briefly mentioned in the next section, but it is assumed that utilities reviewing this reporthavealready determined that more PEVs in their service area would be beneficial.

In addition to being in the interest of most utilities and society at large, PEV owners are far more satisfied with their vehicles than gasoline owners are (Ayre, 2016; Linkov, 2015). In theory, this should make it easy for PEV adoption rates to skyrocket and for owners, utilities and society at large to reap the benefits.

In practice, there are many factors that limit adoption rates. PEVs are expensive up-front, public recharging infrastructure is sparse, manufacturers are limiting supply, and misconceptions abound. Meanwhile, PEV advantages and incentives are very poorly understood by the public (Carley, 2013).

This report will explore the efficacy of various tactics that utilities can employ to encourage PEV adoption. These tactics are collectively referred to as “incentives” even though not all are direct or financial.Incentives work – while US PEV share in 2014 was under 1%, California with better-than-average incentives (more cars available than other states, a rebate, HOV access, above-average infrastructure and multiple awareness programs) reached 3.3%, and Norway with a long list of diverse and generous incentives reached 14%.

2.1 Differences between PEV and ICE sales

While considering which methods of encouraging adoption will be most successful, it is helpful to understandsome of the many ways in which selling a PEV is different from selling an ICE.

Poor awareness. Most potential buyers can’t name a single PEV (Singer, 2016a), haven’t driven one, don’t know where or how to charge a PEV, are more familiar with the high purchase price than the incentives or low operating costs, and aren’t familiar with the personal advantages (Carley, 2013). They assume the worst – high costs, inconvenience, poor driving experience, etc. (Carley, 2013).
Expensive new technology makes consumers nervous. A PEV may be a consumer’s second-largest purchase ever after housing, sothere may be fearof making a mistake - better-known ICE choices could feel safer. Consumers don’t yet see large numbers of PEVs driving around, so if they consider them at all, they wonder what is wrong with them. PEV knowledge helps a great deal (Singer, 2016a) but it is far easier to skip the research required to become knowledgeable. Even whenconsumers do have all of their questions answered, like consumers of all products they consider what they may lose twice as much as what they may gain.
There is a very small but extremelyvocalgroup of PEV opponents that continuously harp on PEV downsides, including several imaginary ones like insufficient safety and performance, frequent battery replacements, no warning on excessive energy use, inability to use in cold weather, etc.
Limited charging infrastructure. Most apartments and condos – where 34% of Californians reside - do not have charging available (CA PEVC, 2013). Public chargers are limited and often blocked or broken (Saxton, 2012). In many places there are no corridor Direct Current (DC) chargers so BEV road trips are impractical to make.
Few modelsare available. There are dozens of types of ICEs available, from tiny compacts to sports cars, trucks, vans and SUVs. Yet most PEVs are fairly small hatchbacks. This keeps a significant portion of the market from considering a PEV (Berman, 2016; CA PEVC, 2016).
Limited supply and advertising. Many manufacturers only make their PEVs available in the few states that require them (Stroo, 2015). Even there, they may only make limited numbers available and then stop building them. Even when they technically make them more widely available, dealers typically don’t stock them and there is often no advertising (TEC, 2013 – footnote 35).
Lack of dealer incentive. While some automakers are legally required to sell some PEVs in some places, most are also legally required to sell them through dealers, whom many consumers rely on (TEC, 2013 - footnote 35). However, there is no requirement for dealers to sell PEVs. In fact, they have some disincentives (Schwitters, 2015). They have to train staff, buy new equipment, and spend more time per sale explaining the new technology when new car sales are already barely break-even for most dealers. They make far more profit servicing ICE vehicles, but many PEVs require less service. With little incentive to sell PEVs, most dealers simply don’t try (though some that do tryhave been very successful). A few are even openly antagonistic.
Non-mainstream strategies. If automakers produce a mainstream PEV that cannibalizes sales of their ICE cars, dealers seethe PEV as more work for less money and don’t sell them. But non-cannibalizing (which often means slightly unattractive) conquest cars may interest some dealers because they pull in NEW customers to the brand (Schwitters, 2015). Attractive halo cars are fine too, because they are mostly to draw people in to showrooms. While the market will likely shift over time, manycurrent BEVs and some PHEVs arestill one of these two types, neither of which is meant to be sold in large volumes.

The normal factors that drive most ICE purchases – manufacturer large-scale production and advertising, dealer availability and sales effort, consumer familiarity and demand – are all greatly lessened for PEVs. This is why third parties like utilities getting involved can make a great difference in PEV adoption rates.

Consumers trust utilities more than government or auto industry sources for PEV information (EEI, 2014).At least onemarket researcher is confident that the involvement of someutilities is a key reason for California’s high adoption rate in some areas (Navigant, 2016a).

While PEV sales are low so far, the environment for growth is very good – there are favorable policies, incentives, vehicles available, etc. However, some of these growth enhancers may disappear soon (Shepard, 2016b), so especially considering network effects based on market size that will continue selling cars after the incentives end (Li, 2015), the best time to act is now.

2.2 PEV potential for electric utilities

Utilities are not a particularly homogenous lot, so not all of these will apply to every utility. But PEVs present enormous opportunities to many utilities (Shepard, 2016a).Some of the possible advantages of having a number of PEVs in a utility’s service area can include:

More off-peak energy sold. The average PEV consumes roughly 1 kWh for every 3 miles of travel after charging overhead. At 12,000 miles per year, that is 4,000 kWh more electricity sold. Many of the PEVs in California are leveraging time-of-use rates that encourage customers to charge off-peak, mitigating the need to build more capacity. This can help counter and possibly even reverse declining utility sales due to energy efficiency programs and departing load due to distributed generation.
Additional load from PEVs makes more efficient use of existing utility assets, which –especially through off-peak charging – puts downward pressure on electricity rates.
Light-duty PEVs could drop GHG emissions up to 64% by 2050, result in consistent and widespread reduction of air pollutants such as VOC, NOx, SO2 and PM, and reduce petroleum use by nearly 100% (EPRI, 2015). Doing the right thing to help enable this transition will put utilities in a positive light with respect to their customers, regulators and community stakeholders.
Easier integration of renewables. PEV loadsare generally during low demand times (and can be moved around with TOU rates and other tools), making it easier to justify the addition of renewable power sources that cannot be ramped (INL, 2013; INL, 2015a; Baumhefner, 2016). PEV buyers are also more likely to be interested in the source of their electricity, support renewable integration, and pay for programs like Green Power (Axsen, 2012).
Possible savings in CO2 compliance programs. While it depends heavily on your regulatory environment, generation mix and costs, in some cases it is more cost effective to offer incentives for PEVs rather than to pursue other CO2 reduction strategies (Thomas, 2014). This can be trueeven before considering other PEV benefits to the utility.
Potential load control. Many PEV owners are open to load control programs, such as letting the utility or a third party turn PEV charging on and off as needed as long as it does not prevent the charge from finishing by a specified time (Tal, 2016).
Going a step farther than load control is pulling energy from idle PEVs at peak load times via “vehicle-to-grid” (V2G). This is technically possible now, but automakers need a business case to cover the cycle wear on the batteries they warranty. Perhaps automakers could price V2G-capable cars higher, and interested utilities could offer a rebate to consumers that buy V2G-capable cars and enroll in a utility V2G program.
Studying early PEV adoption in your service area is a must for growth planning. PEVs are coming, only the time scale is really in question. Utilities that communicate with early adopters and provide some incentive for them to allow their vehicle charging to be monitored can learn more about PEV charging behavior (which varies by demographics, geography, climate and infrastructure) in their service area and better plan for growth.
Potential income other than standard kWh sales. While it may require regulatory changes at least to allow for a pilot program, utilities that install public charging infrastructure have an opportunity to experiment with some new business models. Charging infrastructure is typically more of a scarce resource than electricity, so many PEV owner groups encourage fees to be set by connection time rather than kWh sold, typically resulting in higher income (WA UTC, 2016). There are also opportunities to bundle public charging with home consumption, and pre-sell “packages” of energy paid for periodically whether they are consumed or not. California investor and publicly owned utilities are already demonstrating several different and new business models for accelerating EV adoption through providing charging infrastructure.
More customer interaction with utility. PEV buyers rely on their utility daily and greatly appreciate electricity’s price advantage over petroleum products. Many early PEV adopters are eager to participate in experimental programs (Tal, 2016), and some are happy to put utility-provided “advertising” stickers on their PEV (see cover photo). PEV customers are larger, stickier, and offer potential for new business models and a more interactive customer relationship.

Supporting PEVs is a non-trivial new task for many utilities, and especially given regulatory changes that may be required, there is understandabletemptation to put it off and see how things develop. However, many utilities have come to realize that not only will they have to do the work anyway - Oregon recently passed a law requiring the large utilities to have a plan to encourage transportation electrification (Drive Oregon, 2016) and California has considered such a law - but there are significant advantages to them if they move early and take a hand in growing, monitoring, and becoming part of the market. There is generally great support from government, PEV owners, NGOs and industry organizations for them to do so.

Several large utilities in California have been leaders in the area and at least one researcher believes that is one key reason for California’s exceptionally high PEV adoption rate (Navigant, 2016a).

2.3 PEV challenges for electric utilities

As with anything new, large and complicated, the story is not all good news. PEV adoption can cause some challenges for utilities. Fortunately these are usually minor issues with straightforward methods to deal with them. Note also that these issues are only encountered in relation to PEV adoption rates, which means the utility will simultaneously realize PEV benefits that willlikely more than compensate for addressing these challenges.

PEV charging couldincrease peak load.Fortunately PEVs don’t usually charge at peak demand times, and TOU rates have proven quite successful in moving most charging to times when the utility has more power available than demand (INL, 2015a). Setting appropriate public charger use fees, monitoring and communicating with PEV owners, load control programs, encouraging home or workplace charging as appropriate, and depending on demand curves encouraging either Level 1 (L1, which is low-power 120V AC, but charging much of the time a PEV is parked) or Level 2 (L2, higher power 240V AC, but can set a timer to only charge during off-peak hours) can also help.
More long-range BEVs in the future mightmean that DC charging during peak hours will rise. This is not a given because much current DC use is for daily use for short-range BEVs, which may decline in favor of more charging at home overnight as BEV ranges increase.It also depends on geography and DC station locations. Even if daytime DC charging does increase because of long-range BEV road trips, road trips account for a small percentage of the energy consumed and it is easier to work with a few DC station owners rather than all PEV owners (which would includenon-customers passing through). Local storage or generation can help, as can rates to discourage peak use or charging “bundles” that include more-profitable off-peak energy with expensive peak energy. Worst case, demand charges can be set to help with buildout to cover additional load.
PEV clustering can overload some neighborhood transformers.PEV adoption may not be uniform in your service area, so sometimes local transformers can be overloaded from on-peak charging, multiple high-amp off-peak chargers, or from transformers in hot areas being designed with the assumption that they would be underused at night. TOU rates, monitoring and educationcan help quite a bit, but at some point some transformers may have to be upgraded just as they would for other types of load growth (INL, 2015c). Alternatively, utilities can modify their design standards for when transformers reach their normal end-of-life to require larger replacement transformers.
Utilities operating under regulations to reduce electric energy used, without getting credit for displacing gasoline, may be penalized when their PEV customers use more electricity. Fortunately in most areas it is easy to make an economic, environmental and practical fairness case for changing these regulations. While some education may be required, there are many organizations and PEV owners willing to help. This can open up some great possibilities for profitable growth for the utility.

PEV adoption rates are rising soutilities will have to address these challengeswhether they encourage PEVs or not;just at a different pace. Understanding PEV charging habits in your service area, communicating with PEV customers and planning for more PEVs is critical for all utilities.